Exploring current and past conspiracies from a logical view point. Also bringing you legal and practical information about cryptography.If you're the victim of a conspiracy, you need crypto.

05 April 2012

HAVE YOU LOST YOUR HOME YET?

WHAT THE HOUSING CRISIS REALLY MEANS

Just how bad is the US housing
crisis? More importantly, how does it – or will it affect you? I
can't answer that for you personally since each person's situation is
different and anybody's situation can change overnight. What I can
do is show you what has happened and what that means for the future.

The bottom line is this; most
people are either in some level foreclosure, or know someone that has
or is about to lose their home. Think about it for a minute. Who do
you know that is 90 or more days behind on their mortgage or has
already lost their home? According to Time Magazine(Feb
12, 2012) 22%
of home-owners are upside down in their mortgages. That means they owe
more on their mortgage than their home is worth and, as such couldn't
sell it if they had to.

I live in Billings, Montana; a
typical mid-size city. According to the US Census Bureau1,
Montana had an estimated population of 998,119 in 2011. About 104,000
of those live in Billings. The Census Bureau also says that about
66% of families own their own home. In Billings, that would be about
68,640 people. If each family averages 2.592 members then there about 26,501 private homes in Billings.

MainStreet.com3
said:”A total of 2,698,967 properties entered some stage of
foreclosure – default notice, scheduled auction or bank
repossession – last year.” That (according to them) was 1 in
69. In Billings, that would be about
304 homes in some stage of foreclosure. Los Angeles county has a
population a little shy of 10 million, which would mean about 56
THOUSAND families that have lost or will lose their home in
LA. You can do the math for your city.

And what is the prognosis? Will
things get better or worse? To answer that, we need to know what
caused the disaster in the first place. Why did the bubble burst? Was
it the Republicans? The Democrats? Greedy Wall Street Moguls or the
Evil Bankers? Did Fannie Mae and Freddy Mac just start taking
people's homes?

I think that, when pressed, few
people can trace the roots back to where it started. Most people that
I know don't realize that the base causes stem from President Jimmy
Carter's administration and the theCommunity Reinvestment Act4
(CRA), enacted by Congress in 1977.

The CRA, in a nutshell, directed
banks to loan money to people to buy homes. Whether those people
could afford them or not. And two government institutions known as
Fannie Mae and Freddy Mac guaranteed those loans. Many of the loans
were adjustable rate. That means that every so often, your interest
rate can go up or down. They rarely go down.

When the economy began to tank
after the internet bubble burst, the interest rates went up to more
than the original payment. Then the payments went up to more
than many people could afford. People had to get out from under
their mortgages so a lot of houses went on the market all at once. The ever-present law of supply and
demand kicked in. More houses for sale meant lower prices and
suddenly a whole lot of people owed more on their homes than they
were worth. They couldn't sell them and they couldn't afford the
payments. The only thing left is foreclosure.

That's the short version. Follow
the links for the long version.

And just who are Fannie Mae and Freddy Mac? Why do they have
anything to do with your house?

According to Wikipedia, “The Federal National
Mortgage Association, commonly known as Fannie
Mae, was founded in 1938 during the Great Depression as
part of the New Deal...The corporation's purpose is to expand the
secondary mortgage market by securitizing mortgages in the form of
mortgage-backed securities (MBS),[3] allowing lenders to reinvest
their assets into more lending and in effect increasing the number of
lenders in the mortgage market by reducing the reliance on thrifts5.

About Freddy Mac, Wikipedia says
“The Federal Home Loan Mortgage Corporation
(FHLMC), known as Freddie Mac,
is a public government sponsored enterprise (GSE)...The FHLMC
was created in 1970 to expand the secondary market for mortgages in
the US. Along with other GSEs, Freddie Mac buys mortgages on the
secondary market, pools them, and sells them as a mortgage-backed
security to investors on the open market.”

The fact that,
as of 1970, we have two government-run and non-elected agencies doing
the same job at twice the cost and twice the confusion is another
story. Here's what it means as far as the housing crisis.

John Q.
Bluecollar takes out a mortgage down at his local bank. Fannie Mae
&/or Freddy Mac step up; purchase that loan from the bank, put it
together with several other loans they purchased [with
your tax dollars]and
sell them as a package to some investor.

Since
the CRA, the bank doesn't really care if Mr. & Mrs Bluecollar can
repay the loan because they know they will get their money from
Fannie or Freddy. Ms. Mae and Mr. Mac don't care either, because they
know they can pawn it off on some unsuspecting investor who (quite
incorrectly) believes that, since they came from the a
supposed-government agency (since 1968, Fannie has been public) the
package has to be a good investment.

WRONG!!!

Now the
investors are stuck with a bunch of bad debts and foreclosed homes;
known as Toxic
Assets6”.They
(the investors) lose a bunch of money. They don't want and won't buy
any more of these money-losing packages, which leaves Fannie and
Freddy stuck with a few BILLION dollars worth of toxic assets and now
they can't buy any more mortgages from the banks. The banks can't
collect the loans back from people who can't afford the payments so they go bankrupt. The FDIC7has
to bail out the banks8
with more of your tax dollars and the whole thing spirals down to
what we have today. More people demanding more free help from the
government that has less money because more businesses close down and
the ones that remain have less profit so they pay less taxes. Banks
are belly-up so businesses can't borrow money so they can't hire more
people so unemployment goes up so less people can afford a house so
more banks have more foreclosed homes so...ad nauseam!

And just exactly what does all
that mean for you, your family and the future?

The good news is that, if history
is a reliable indicator, things will get better; and probably before
the USA goes the way of Greece. The bad news is that it WILL get
worse before it gets better.

WordPress.com says “The
housing market won’t recover until employment increases and
consumers become more confident.9”
And, according to the San
Francisco Chronicle “"When things turn and there is
job growth and there is consumer confidence back, then we'll see a
change," said Douglas Yearley, chief executive officer of luxury
builder Toll Bros. Inc. "We have to get job growth back.10"

In other words, until people THINK
there
is a recovery, there won't be one. Once Americans start to believe
that things are getting better, they will spend more of what little
money they have. That will bring more capitol into businesses who
will then begin to hire more people. Less unemployment will mean even
more consumer confidence which will mean more spending which will
mean more growth and more taxes collected to help people that haven't
caught up yet. With more growth, housing prices will start to recover
and more people will have jobs and be able to afford to buy a home.

Someone once told me that it is
easier to act yourself into a new way of thinking than to think
yourself into a new way of acting.

Apparently we are going to have
to do it the hard way. We have to believe in our recovery first. Then
and only then will there actually be a recovery.